USTR recently issued a report on national trade estimates and
foreign trade barriers which identified 44 countries that maintain
are extensive trade barriers. We have begun to review the most sig-
nificant areas that can be addressed through the use of section 301
if our current bilateral and multilateral efforts are not successful.
When I became the USTR on January 22, I asked the question
of whether or not we had any ongoing section 301 actions, not for
the purpose of enforcement for the sake of enforcement, just as a
matter of trying to establish an inventory for the office and try to
understand what we had on our plate. I was surprised to find there
were no 301 actions. I then asked a question you might ask, Mr.
Chairman: Is every country in the world living up to its trade
agreements with the United States? And I got the obvious answer:
No. I have asked for a review of every trade agreement that USTR
has. We are reviewing the results of this survey now and I will look
forward to reporting to the Congress.
Let me indicate that the staff is correct, not all countries are liv-
ing up to their agreements and there may be some proper subjects
for action among the more pernicious of the violations that have
been occurring.
We have recently completed a third round of accelerated elimi-
nation of tariffs under the United States-Canada Free Trade Agree-
ment. Tariffs of 100 items valued at $100 billion were eliminated.
We continue to work well with the Canadian Government on this
and as Congressman Crane noted before, on the supplemental
agreements to the NAFTA.
My March visit to Europe emphasized USTR's interest in the en-
gagement of the Uruguay round, on the failure of the European
agreement to implement the Blair House agreement on agriculture
and other discriminatory actions by the Europeans, especially in
8
the audio visual area, which has concerned us greatly. Let me indi-
cate we also talked about Airbus.
I am pleased to announce that as a result of that visit and good
staff work on the part of both USTR staff and the staff of the Euro-
pean Community trade minister's office, the European Community
is well on its way of implementing all aspects of the Blair House
agreements. Until now they had not done so and now they have
taken almost all actions necessary in the area of oil seeds.
Let me speak for a moment on the purpose for which we are
here. We are proposing a 2-year extension of the USTR authoriza-
tion through 1994 and 1995. Our request is for a straightforward
continuation of the existing authorization. Authorization amounts
for 1994 are $20,143,000 and 1995 of $20,419,000 are the same as
in the present fiscal year 1994 budget. These are very modest
budget levels.
I might note, as you would know, Mr. Chairman, that in fiscal
year 1991, the budget was $20 million- 1992, $20.4 million; with
the supplemental $20 million; in 1993, $20.3 and $20.94 million in
1995. So basically USTR's budget has been a straight line.
Our full-time employees will drop by five from a total of 162 to
157 next year. We are going to meet the President's commitment
to reduce administrative expenses by 14 percent by 1997, fiscal
year 1997.
I want to note with pride that this staff is the hardest working
group of people I have ever been associated with. We are working
harder for less, given inflation, with a much larger agenda than
ever. I am extremely pleased and honored to be working with the
USTR staff. If you were at our offices on Saturday or Sunday, you
would see many of the staff members there. They take pride in the
work they do.
The reductions that I have spoken of will be hard to achieve, but
I fully support the President's plan to reduce the administrative ex-
penses. We have already taken actions this year, including freezing
hiring, dismissing temporary employees, reducing overtime, adopt-
ing tougher travel policies for employees, cutting all new equip-
ment purchases, and eliminating two automobiles and two drivers,
40 percent of our total worldwide automobiles. I know it is some-
what de minimis compared to other agencies that might come be-
fore you, but we did that.
We will continue to achieve budget savings in 1994 through addi-
tional management improvements. We will comply with the Presi-
dent's plan to trim administrative expenses.
With that, Mr. Chairman, I appreciate your indulgence. I look
forward to your questions and members of the committee. And
again, I am honored and pleased to appear before you.
[The prepared statement follows:]
Testimony of
Ambassador Michael Xaator
United stataa Trad* Representative
Before tbe Subcommittee oa Trade
Committee oa Waya and Maaaa
United stataa Houaa of Raproaaatativa
April 21, 19*3
I welcome this opportunity to appear before the Subcommittee
today to present the budget authorization request for the Office
of the United Stataa Trade Representative. Although little time
has passed since the last time I was before you, a great deal has
transpired in the trade arena and I look forward to bringing you
up to date on issues of mutual interest and concern.
As members of this Subcommittee are aware, the Office of the
United Stataa Trade Representative haa primary responsibility for
developing and coordinating U.S. international trade, commodity,
and trade-related direct investment policy, articulating trade
policy for the Administration and for leading negotiations with
other countries on these matters.
We carry out this mission with a small but highly motivated,
and professional staff that is dedicated to promoting U.S.
economic interests.
USTR's authorization and budget request for Fiscal Years
1994 and 1995 repreaenta a straightforward extension of existing
budgetary authority, with a very modest increase. Therefore, I
will focus ay testimony on an overview of the ambitious schedule
before USTR so that a better understanding of our request will be
considered in the context of our full agenda.
Full Agenda
Since taking office in January, President Clinton's highest
priority haa been to strengthen the U.S. economy. Accordingly,
the President haa put forth a visionary program designed to
reduce the budget deficit and increase investment in areas
critical to our future economic strength.
Implementation of the President's strategy starts with the
enactment of the President's economic program. Yet, as aembers
of this subcommittee are acutely aware, and the President stated
in hia American University speech, economic growth from expanded
international trade ia a crucial part of our economic strategy
and future security.
This last recession and the modest recovery we have seen are
distinct from previous experience in that unemployment has
remained disturbingly high. Increasing U.S. exports is key to
turning that problem around.
Last year alone, 6.7 million U.S. jobs were created by
trade. For every billion dollars in exports, 15,000 joba are
created. Trade ia clearly an engine which can drive economic
recovery and job growth.
The Administration's trade agenda for fiscal yeara 1993 and
1994 ia a aix % of enforcing commitments, reaching closure on
negotiationa begun and found to potentially advance U.S.
interests, protecting U.S*. creativity from piracy, fighting to
open marketa to U.S. goods and services, grappling with the
complex issues posed by the intersection of trade and the
environment, and moving ahead with initiatives to strengthen our
trading ties with the rapidly-growing nationa of the Asian-
Pacific.
Many of the issues must be addressed in the next year. These
issues include:
10
• Renewal of "Fast Track" Authority for GATT
As you know, current negotiating authority and fast track
implementation procedures may not be used to conclude the Uruguay
Round of GATT. Those provisions required the President to notify
the Congress by March 2, 1993, of his intent to enter into an
agreement before June 1, 1993. Because the negotiations were not
satisfactorily concluded by March 2, no such notification could
be made.
The draft bill that will be sent to Congress would extend
Congressional "fast track" procedures to only the Uruguay Round
implementing bill. This would require the President to notify
Congress no later than December 15, 1993, of his intent to enter
into such agreement on April 15, 1994 — in effect providing us
with an additional ten and one-half months to conclude the Round.
The bill would also expand the 90-day period between
notification to the Congress and signature of the agreement to
120 days, to afford ample time for consultation between the
Administration and Congress on draft implementing legislation.
Since additional time is given for consultation between the
Administration and Congress, additional time would also be
provided in the bill for the submission of private sector advice.
In all other respects, the fast track procedures would remain the
same.
I want to emphasize that the Administration is seeking this
authority only for the Uruguay Round. However, the President is
deeply committed to negotiating a free trade agreement with
Chile. The Administration will seek a separate extension of fast
track authority for future agreements of this type. We will
consult fully with Congress on this matter.
I might note that the fast track announcement, and the fact
that it dealt solely with the Uruguay Round, has sent an
important signal to U.S. trading partners about the priority that
the Administration attaches to a strong and open multilateral
trading system, and its determination to complete the Round.
° Completing the Uruguay Round of GATT
The Uruguay Round, involving more than 100 nations, began in
1986. The failure to complete the Round has been a source of
disappointment and frustration to the United States and many of
our trading partners. A successful Round would lower tariff and
non-tariff barriers around the world, and establish new
multilateral rules for world trade.
Completing the Round is the single most important step we
can take to open foreign markets around the world to U.S.
manufactured goods, agricultural products and services. Our most
significant trading partners have underscored their commitment to
complete the Round this year.
USTR, in cooperation with a number of other agencies, has
identified areas where the Draft Final Act, the so-called Dunkel
Draft, could be improved. He have also set our sights on an
ambitious market access package, which would bring benefits to
U.S. companies and workers, by increasing exports of U.S.
manufactured goods, agricultural products and services.
The short-term goal is to secure basic U.S. - EC agreement
on market access and building on that to create a larger market
access package, including significant contributions from Japan
and key developing countries. Accordingly, a series of meetings
is planned in the next three months with the EC, Canada and
Japan.
Our clear objective is to produce concrete progress by the
time of the G-7 summit in Tokyo in July.
11
• completing the North American Free Trad* Agreement
The President's dssirs is for a North American Pros Trad*
Agreement that craatas a formidable competitive edge for U.S.
products in domestic and global markets. As part of the
President's economic program, NAFTA prepares us for the
competitive challenges the future will bring.
Augmented by strong and anforcaabla sida agreements, NAFTA
will rasult in greater economic and employment growth in the
United States and the upward harmonization of wages, worker
standards and enhanced environmental quality throughout North
America. Mexico is already our second largest export market for
manufactured goods, with the further reduction of tariffs in
NAFTA, we anticipate that market will grow further.
Consequently, USTR has committed itself to negotiating
strong supplemental agreements which break new ground in three
areas: environmental quality, worker standards, and import surge
concerns .
The Administration is committed to negotiating agreements
that will ensure improved enforcement of the laws in Mexico. He
also hope to create strong labor and environment commissions with
the necessary teeth to review national enforcement, and to hear
and follow up on complaints from citizens about deficient
enforcement.
We will not sacrifice substance for speed but it would be
our hope to negotiate the supplemental agreements in a timely
fashion, to enable the whole NAFTA package to go to Congress for
implementation in time for NAFTA to be effective on January 1,
1994. Plans for border cleanup and worker retraining and
adjustment, spearheaded by EPA, State and Labor, are crucial
parts of the overall NAFTA package.
* GSP Renewal
The Administration, through USTR, will seek a renewal of the
Generalized System of Preferences (GSP) program.
This program promotes economic development and creates
markets in developing countries and is an important tool for the
promotion of our trade policy. In past years, GSP has been used
to help secure gains in both intellectual property and worker
rights areas. He want to sharpen its use in these areas.
Our initial aim is to prevent the program from lapsing on
July 4, through a short-term extension. During the extension
period, we would take a hard look at the program and consider
ways of improving it. He are currently working on an extension
proposal.
° Japan
No single trade issue had proven more complex or contentious
than those arising from our bilateral problems with Japan.
Therefore, it is vitally important that we make progress on our
market access problems with Japan, many of which have been
hurting U.S. companies and workers for more than a decade.
USTR will place particular focus on assuring Japan follows
through on commitments "already made to the U.S. government and
addressing on-going sectoral issues such as auto parts,
automobiles, telecommunications, semiconductors, construction,
computers, and supercomputers. He will also insist on Japan
assuming its share of the responsibility for the Uruguay Round.
12
• China
USTR has aggressively monitored implementation of the market
access agreement signed in 1992. During 1992, USTR negotiators
travelled twice to Beijing, pressing the Chinese to fulfill
pledges made under the Agreement to open their markets to key
U.S. export sectors. USTR is also discussing additional market
openings for key sectors, beginning with computers and integrated
circuits, heavy machinery, medical equipment, and distilled
spirits.
On intellectual property rights, the Chinese continue to
implement faithfully the agreement that we signed in January
1992. As a result of the agreement and follow-on discussions
with the Chinese, U.S. agrichemical and pharmaceutical
manufacturers now can obtain product patent protection and, for
products patented in the United States between 1986 and 1993,
administrative protection in China.
Finally, because China's market to U.S. services
remains largely closed, USTR has — with industry support —
constructed a new trade initiative for U.S. service firms
designed to secure fair and comparable access for U.S. firms.
•Title VII
USTR conducts the annual investigation of discrimination in
foreign government procurement, provided for in Title VII of the
1988 Trade Act. The investigation is a detailed, resource-
intensive one, employing many information sources — from our
embassies, from the private sector, from various agencies of the
government — and significant staff time.
An interagency group, led by USTR, examines in some detail
the procurement practices and policies of countries which sell to
the U.S. government. The review involves a tremendous amount of
cooperation among agencies of the executive branch, as well as
with the Congress.
I would like to emphasize that we share the objective of the
Congress, reflected in the Title VII statute, of opening foreign
government procurement markets to U.S. exporters. Our efforts
under Title VII to open the EC's market in the telecommunications
and heavy electrical sectors reaffirms our commitment to this
objective. We will continue to work diligently to see that Title
VII concerns are addressed.
• Asia Pacific Economic Cooperation (APEC)
The Asia-Pacific region is collectively America's largest
trading partner and the most dynamic region of economic growth in
the world. Our economic future is heavily bound up with Asia,
yet America's economic presence and leadership in the region has
been overshadowed by a decade-long trend of steadily increasing
Japanese economic presence in the region.
This year, the United States chairs the 15 nation Asia
Pacific Economic Cooperation (APEC) and will host the APEC
ministerial meeting in November in Seattle. Our position in
APEC, at the time of a new Administration in Washington, offers
the United States a great opportunity to strengthen our ties with
this critical region. *
• Intellectual Property Issues
USTR staff is in the process of completing review of our
trading partners' protection of intellectual property rights
(IPR) and market access issues under the "Special 301" provisions
of the 1974 Trade Act. The results of the review must be
13
announced by April 30. Currently, negotiations are on-going with
a nuaber of countries seeking to avoid designation as "priority
foreign countries."
While I am not currently in the position to name specific
countries against which we may recommend action, I want to
underscore the Administration's commitment to protecting U.S.
intellectual property and engaging other countries at all levels.
We recently entered into an agreement with the Philippines
committing them to making the legislative and administrative
changes needed for a world class intellectual property regime.
USTR will continue to work aggressively to enforce U.S.
intellectual property rights worldwide.
Special 301 has been a very valuable statute, but ultimately
its credibility rests on our willingness to take strong action
against those countries which contribute to piracy.
* Section 301 Review
On March 31, 1993, we released the eighth annual National
Trade Estimates (NTE) report on foreign trade barriers.
This report helped us catalog information on various trade issues
and facilitated the establishment of our trade priorities and
allocation of resources. Despite the evidence of extensive trade
barriers maintained in 44 nations, there were no pending Section
301 investigations at the time the Administration took office.
USTR staff have begun a comprehensive review of the most
significant barriers in the NTE Report and are identifying those
barriers that can best be addressed through the use of Section
301, if our current bilateral or multilateral efforts do not
result in market-opening measures.
* Canada
We recently achieved a successful completion of the third
round of accelerated elimination of tariffs under the U.S. -
Canada FTA. Agreement was reached far earlier than scheduled and
tariffs on over 100 items, valued at approximately one billion
dollars in two-way trade, were eliminated. The previous two
rounds of accelerated tariff elimination resulted in early
removal of tariffs on over $8 billion in bilateral trade.
Lingering disputes, particularly with respect to beer and
wheat require continued discussions with Canadian officials,
however .
•The European Community (EC).
USTR has moved strongly on certain disputes with the EC,
which have clouded this critical trading relationship. The
closed nature of the EC procurement market has frustrated
negotiations on the GATT Procurement Code and been a major
obstacle for U.S. exporters for years, especially in the
telecommunications sector.
My visit to Europe in late March and the efforts of USTR in
the short-term emphasize the Administration's interest in renewed
engagement in the Uruguay Round, discussions about the utilities
directive, the failure of the EC to implement aspects of the
Blair House agreement on agriculture, discriminatory actions
against U.S. audiovisual interests, and our continuing concerns
about EC subsidies to the Airbus consortium.
I have secured a commitment from the EC that the oilseeds
part of the Blair House agreement would be implemented in May,
with other parts of the agreement being implemented in April.
'Trade and the Environment
14
The issues involving ths intersection of trad* and
environmental policy hava provan to ba extreaaly coaplicatad and
difficult. Thara has bean no coherent U.S. policy in this area,
and in the past, U.S. actions and policy in particular instances
were unsupported in the international arena.
USTR is actively involved, along with other agencies, in the
effort to fashion a coherent Administration policy, which would
serve the Administration's objectives of both expanded trade and
sustainable developaent.
USTR has chaired an interagency group which conducted a
review focusing on three key areas: the use of trade measures to
achieve environmental objectives; linkages between trade and
environmental agreements; and process issues involving trade and
the environment, including public participation and interagency
coordination. He anticipate further effort will be necessary on
this important but difficult issue.
Authorization and Budoet Request
This authorization request seeks a two-year authorization
for the Office of the United States Trade Representative,
covering fiscal years 1994 and 1995. Our request parallels prior
year authorizations. We are requesting a straightforward
extension of existing budgetary authorities. The proposed budget
authorization level for fiscal year 1994 is $20,143,000, and for
fiscal year 1995 the proposed level is $20,419,000. He are also
proposing to continue the existing authority allowing USTR to
carry over up to $2,500,000 of its annual budget until expended.
For FY '94 our request is a modest one. He are requesting
$20.1 million in budget authority. This represents only $151,000
more than the level appropriated last year ($19.9 million). This
request incorporates the features of the President's program to
reduce full-time equivalent positions and to cut administrative
expenses. Compared with the fiscal year 1993 appropriation level
we have cut those positions by 5 and trimmed our administrative
expenses by slightly more than 3 percent. These cuts for the
organization charged with handling trade issues for one of the
world's preeminent trading powers are not insignificant.
Our budget request is $400,000 less than what is actually needed
to keep pace with current service needs and in real dollar terms,
is 8% less than three years ago.
It is undisputed that the Office of the United States Trade
Representative has a critical mission and, as my testimony
outlines, a full agenda. It is a mission the staff at USTR and I
have taken on with enthusiasm. At the negotiating table, we will
be representing the interests of American workers, farmers and
businessmen and women, just as my counterparts represent theirs.
I will do so with a relatively small staff and budget — only 157
full-time equivalent positions — and the assistance and
participation of other agencies and departments.
In closing, Mr. Chairman, I would remind the Committee that
USTR's challenges are formidable, but so is our resolve. To
effectively face these challenges, I urge the Committee to
approve our request for a two-year authorization covering fiscal
years 1994 and 1995. In past years you have strongly supported
USTR's mission to open markets and to expand trade throughout the
world. Your continued support remains critical to America's
economic prosperity. *
15
Chairman Gibbons. Mr. Kantor, we appreciate your statement,
the thoroughness and the vigor with which it was delivered.
Your budget is modest and certainly will have no great opposi-
tion in this committee. I would only warn you based upon the
abundance of experience, I applaud the staff and their vigor, but
you can't work day in and day out, week in and week out, weekend
after weekend, long hours, without suffering a terrible loss of pro-
ductivity, plus a loss of balance in judgment. So don't let them
work too hard, Mr. Kantor. If you do, we will all pay the penalty
if you push them too hard.
Ambassador Kantor. We will try to be balanced, Mr. Chairman.
Chairman Gibbons. Yes, you need that, particularly in your
agency where you have got to think critically and originally and ob-
jectively and you are on just about a 24 hour clock anyway because